S&P Launches Global Carbon Indices
Source: Seeking Alpha, Index Universe (3/11/09)
"Standard & Poor's has launched the first in a series of global low carbon indexes, which could eventually lead to a third exchange-traded product. . ."
The S&P U.S. Carbon Efficient Index will measure the performance of large cap U.S. companies with relatively low carbon emissions, while seeking to closely track the return of the S&P 500.
The new S&P benchmark will have some competition. Last year, Merrill Lynch launched its own MLCX Global CO2 Emissions Index. At the time, index officials said they hoped to base an ETF off the product.
The S&P U.S. Carbon Efficient Index is different from both the Merrill Lynch product and the exchange-traded products now out. The AirShares EU Carbon Allowances Fund (NYSE: ASO) is actually a commodity pool that tracks a basket of exchange-traded futures contracts for European Union Allowances [EUAs]. Each contract provides for delivery of 1,000 EUAs at a specified price.
Because the commodities involved aren't physically deliverable, ASO can't be considered an ETF. But it acts like many exchange-traded commodities products that are popular in Europe. It's also important to note ASO represents a pool of futures contracts rather than notes.
The Index is rebalanced quarterly at which point the stocks in the S&P 500 are ranked by their carbon footprint. The 100 equities with the highest scores, and whose aggregate exclusion does not reduce any individual sector weight of the S&P 500 by more than 50%, are removed.